MARGINAL COSTING

Marginal Cost of Sale for Product consist of

• Direct materials + Direct labor + Direct expenses + Variable production

  overhead

• Direct materials + Direct labor + Direct expenses + Fixed production

  overhead

• Direct materials + Direct labor + Direct expenses + Variable production overhead + Other variable overhead

• Direct materials + Direct labor + Direct expenses + Variable production overhead + Other fixed overhead

Statement:

marginal cost of a product is its fixed cost

• TRUE

• FALSE

Formula to calculate contribution margin

• SALES – VARIABLE COSTS

• SALES – VARIABLE COSTS - FIXED COST

• SALES – PERIOD COSTS

• SALES – COGS

This is the advantages using marginal costing, EXCEPT

• Marginal costing provides useful information for decision making

• There is under/over-absorption of overheads with marginal costing

• It is easy to account for fixed overheads using marginal costing

Profit occure, when

• fixed cost > contribution margin

• fixed cost < contribution margin

• variable cost > contribution margin

• variable cost < contribution margin

Information: Direct materials $15, direct labor $10, variable overhead $20, variable

selling and distribution cost $15, Total fixed cost $35, Sales $120

Calculate Variable Production Cost of Sales!

• $25

• $45

• $30

• $60

Information: Direct materials $15, direct labor $10, variable overhead $20, variable

selling and distribution cost $15, Total fixed cost $35, Sales $120

Calculate Variable Cost of Sales!

• $25

• $45

• $30

• $60

Information: Direct materials $15, direct labor $10, variable overhead $20, variable

selling and distribution cost $15, Total fixed cost $35, Sales $120

Calculate Contribution Margin!

• $25

• $45

• $30

• $60

Information: Direct materials $15, direct labor $10, variable overhead $20, variable

selling and distribution cost $15, Total fixed cost $35, Sales $120

Calculate Profit!

• $25

• $45

• $30

• $60

Information: Variable cost product $7, fixed cost $3, sell product $11.

Calculate contribution per unit!

• $1

• $8

• $4

• $7